How AI Will Push Fintech and Banking to New Heights in 2021
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How AI Will Push Fintech and Banking to New Heights in 2021
@peter-jobesPeter Jobes
Peter Jobes is a tech & blockchain writer. Featured in VentureBeat.
AI has contributed heavily to the transformation of financial services in recent years and the technology is poised to revolutionize how we handle money in the near future.
The ability to instantly analyze huge volumes of data to discover new insights and information is driving AI adoption within businesses to build new efficiencies and to spot new patterns to improve the decision-making process.
Consumers may not even recognize the countless ways in which artificial intelligence is already being utilized behind the scenes by businesses on a daily basis, but as many of us continue to become interconnected and dependent on digital processes, its use is likely to become more prevalent over time.
The greater relationship between AI and fintech can help the financial industry combat fraud more efficiently, deliver better customer experiences and utilize a greater level of convenience for customers.
(Image: Mordor Intelligence)
As we can see from the image above, AI applications within fintech are set to grow at varying rates over the course of the first half of the decade, with Asia set to develop fastest. However, Europe and North America will also see significant growth over the coming years as AI technology continues to revolutionize finance.
Let’s take a deeper look at the roles AI will play in pushing fintech to new heights over the course of 2021 and beyond:
Refinement of Robo-Advisors
Artificial intelligence champions finance on-demand, and with more arrivals into the world of investing than ever before in the wake of the COVID-19 pandemic, the value that robo-advisors bring in personalized portfolio management and product recommendations is highly sought after.
“What we have analyzed above actually looks like the consequence of the pandemic and the stimulation packages that followed. This created a pool of funds retail investors could start investing in stocks. As per Fidelity report, there were 26M retail accounts in 2020, i.e. up 17% compared to 2019, while the daily trading volume doubled,” explained Maxim Manturov, head of investment research at Freedom Finance Europe.
Although there have been debates surrounding the ethics and accuracy attached to AI advisors for investments, their popularity is growing at a rapid rate throughout 2021. The latest solutions developed have the power to recommend clients’ investment opportunities based on their income, current investment habits, risk appetite, and many more metrics.
The intricacy of robo-advisors has grown from the days of acting on questionnaire-based solutions to dedicated fund and portfolio management to algorithmic rebalancing and proposals.
The coming years will see these burgeoning technologies refined further into intuitive insights that are better positioned to generate value among investors.
Detecting Fraudulent Activity
Fraud has been a persistent and damaging problem that’s haunted the financial sector. However, the emergence of artificial intelligence has meant that credit card companies now have the power to implement predictive analytics into their fraud detection workflows - helping to significantly reduce instances of false positives.
The range of analytical tools that can be driven by AI help to collect and analyze data by learning and monitoring the user’s behavior patterns. This is then used to identify rarity and any warning signs of fraudulent activity.
We can already see intelligent fintech driven by AI to help limit instances of fraud. For instance, Japanese fintech company MILIZE in 2020 offered to provide intuitive fraud detection and money laundering solutions to financial institutions all around the world. This solution is understood to have the power to detect fraudulent transactions with over 90% accuracy - generating a significant boost for credit card companies.
Truly Personalised Credit Scores
In this day and age, many fintech companies and financial institutions have begun to distribute loans to their customers on a solely online basis. However, despite the convenience that this approach offers to users, it’s vital to check the financial background of the customer and their risk profile before sanctioning any transactions. Here, AI can play a key role in optimizing online loans. Fintech companies can utilize artificial intelligence to recognize clients based on their preset data analyzing and allied patterns provided by machine learning algorithms.
AI tools can also help to automate the process of online loan approval, helping to accurately profile clients based on their risk profiles. This approach helps fintech companies sanction pre-determined loan amounts whilst generating revenue by growing their customer base.
Furthermore, fintech app developers can incorporate more features like EMI calculators and self-assessment for loan eligibility based on AI and machine learning technologies. In a nutshell, the integration of artificial intelligence within fintech will bring more stability to businesses by streamlining their processes and improving the quality of their services.
Automated Claim Processing
Consumerization is the impact that consumer-based technologies like smartphones and messaging apps have on businesses. Leveraging the benefits of consumerization means that businesses — including insurance fintech — are investing in consumer-centric platforms that reach out to customers or interact with them where they spend a high proportion of their time. This can be seen in the frequency in which AI chatbots are used.
Claim processing is an extremely tedious process for insurance companies and their clients alike. It follows a procedure in which it must determine the problems of the customer - like instances of sickness or injury - analyzing the validity of their cases and activating the claim process.
This whole cycle can be lengthy and complex. However, artificial intelligence can automatically assess claims, draw on big data to generate estimates over their validity, and provide a greater level of convenience throughout the process.
In a year where we’re still coming to terms with the COVID-19 pandemic and the unexpected rush to adopt digital transformation strategies, the financial sector has heavily relied on artificial intelligence to perform in 2021.
The examples of AI in fintech that we’ve covered above are just the beginning of what’s set to be a huge decade for the adoption of technology within traditional financial services. The new heights experienced in 2021 will be used as a stepping stone to more comprehensive coverage, automated services, and greater convenience across the industry. The best is yet to come.
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